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Sponsored Content: New Strategies for New Times in the Retail Alternative Investment Industry

As the retail alternative investment industry continues its dynamic evolution, new opportunities are opening up as others pullback.

“The public, non-listed REIT sector is undergoing the most dramatic transformation of products since its inception,” said Rosemarie Thurston of Alston & Bird LLP. “Daily and monthly NAV REITs are now dominating capital raising.”

In launching innovative products that offer a better alignment of interest, greater transparency, more liquidity and lower fees for retail investors, product sponsors are facing some hurdles in today’s uncertain regulatory environment.

“Structuring and marketing direct investment products in 2017 is taking place on a playing field of quicksand,” commented Keith Allaire, managing director, Robert A. Stanger & Company Inc. “The more you attempt to break loose with innovative ideas, the more uncertainty you encounter – from the ultimate disposition of the DOL fiduciary rule and Dodd-Frank, to proposed tax reform, to the Trump Administration’s fiscal and economic policies and their impact on inflation and interest rates, to the consequences of the so-called ‘destruction of the administrative state.’”

The regulatory dust should start to settle in June with the new June 9th effective date for the Department of Labor’s fiduciary rule. The implications of the rule as it then stands is just one item on the agenda at IMN’s 14th Annual Non-Traded REIT & Retail Alternative Investment Symposium that is taking place at the New York Hilton Midtown, NYC on June 12-13.

Industry lobbyists, the Eris Group, will give a critical update on the latest from Capitol Hill at the event which will also have representation from FINRA, NASAA, the IPA, ADISA and leading independent broker-dealers and product sponsors.

IMN’s event series is the established impartial industry meeting at which leaders from the independent broker-dealer and product sponsor communities convene annually to address how to better represent the interests of retail investors. Each year the program is put together under the guidance of an industry advisory board which for 2017 comprises senior executives from Alston & Bird LLP; American Portfolios Financial Services Inc.; Cetera Financial Group; CNL Financial Group; Commonwealth Financial Network; Greenberg Traurig LLP; Morris, Manning & Martin LLP; National Planning Holdings; Newbridge Securities Corporation; NPB Financial Group LLC; Proskauer; Resource Real Estate; Robert A. Stanger & Co. Inc.; and Shopoff Realty Investments L.P.

For seasoned industry executives, these new times need new strategies. As well as innovative product structures, sponsors are looking at new investment opportunities. Credit-orientated retail alternative products is one area that has garnered attention as sponsors look to capitalize on market opportunities.

Competition for deals is rife, however, and this is particularly so within the real estate market. “The value-add real estate market has grown more competitive in recent years, so focusing on pre-acquisition due diligence is essential,” said William Shopoff, CEO of Shopoff Realty Investments. “Concentrating on key operational aspects, such as tenancy, zoning and deed restrictions, construction costs, operating history and other important factors is critical. It is also a prudent business strategy to look at the downside scenario for each acquisition. Information ignored or short cuts taken pre-acquisition can result in issues or even missed opportunities.”

From the IBD perspective, due diligence also remains king.

“Due diligence is the most important part of the process to determine the true merits of an investment offering,” said Neil Greene, senior vice president, sales & marketing due diligence at Newbridge Securities Corporation. “It’s more than just reading a third party due diligence report. It takes eyes, ears and the ability to sift through all the details to come up with a level of comfort with sponsors and their offerings.”

Despite the current market uncertainty, the retail alternative investment industry is no stranger to change and has weathered past storms. Last year saw key market developments with, among others, private equity giant Blackstone entering the space.

“Blackstone’s new REIT follows Jones Lang LaSalle’s ascendancy to the top capital raising product for 2016,” noted Thurston.

Product distribution via major Wall Street banks also finally became a reality last year, a year which also saw increased M&A activity among both product sponsors and IBDs and fee reductions across direct investment products.

So, what is in store for the industry this year?

“Despite the obstacles, sales of direct investment products will make modest gains in 2017, but will pale in comparison to ouija board sales,” said Allaire.

While 2017 has already welcomed some new market entrants, with an uncertain regulatory environment, some would-be product sponsors are cautiously watching from the sidelines. The game-changing DOL fiduciary rule is in contention and both product sponsors and IBDs and their advisers continue to adapt to the FINRA pricing rules for illiquid investments which came into effect in April last year.

Will regulation create a narrower product shelf? Will there be greater concentration of product offerings from a smaller pool of sponsors? Is the market bifurcating? What are the key product structures and investment strategies that will pass the ultimate hurdles of regulation, macro-economic and overall market conditions?

To find answers to these critical questions either polish off your crystal ball or join industry heads as they convene in New York on June 12-13.


IMN’s 14th Annual New York Non-Traded REITs & Retail Alternative Investments Symposium will be host to leading Independent Broker-Dealers, Product Sponsors, Financial Advisors on June 12-13, New York City. Visit www.imn.org/nyreits17 for more information on the agenda, venue, and registration.

*Qualified BDs/RIAs/Registered Reps may qualify for complimentary attendance – please contact Robyn Mulhern at robyn.mulhern@imn.org to see if you qualify*

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